By David Slatyer, Partner
The decision of MetLife Insurance Ltd v Hellessey was recently delivered by the NSW Court of Appeal on 12 December 2018.
MetLife was the group life insurer of a police officer under the First State Superannuation Scheme. Pursuant to the policy, the insured was entitled to a TPD benefit if, having been absent from her occupation as a police officer “through injury or illness for six consecutive months”, she “provided proof to [MetLife’s] satisfaction” that she had become “incapacitated to such an extent as to render [her] unlikely ever to engage in any gainful profession, trade or occupation for which [she] was reasonably qualified by reason of education, training or experience.”
From 2008, the insured was receiving regular medical treatment for anxiety and depression. By early 2011, the insured had been absent from work for 6 consecutive months and, in 2012, she claimed on the policy, providing MetLife with supporting psychiatric evidence.
Thereafter, MetLife sent a series of rejections and procedural fairness letters to the insured on the basis of certain evidence. MetLife primarily based its rejections on Facebook posts which suggested that, notwithstanding her medical condition, the insured continued to attend and participate in various horse-related and other events from early 2011, and continued to act as secretary of a pony club. In particular, MetLife relied on the insured’s involvement in early 2012 in events in which her stud called ‘Fairymead’ featured. MetLife also referred to a vocational assessment which listed numerous job options remaining for the insured given her education, experience and training.
In its rejections, MetLife referred to the evidence of the insured’s treating psychiatrists. It acknowledged that the preponderance of their opinions was inconsistent with MetLife’s own conclusion that the insured could return to gainful employment. Nevertheless, MetLife asserted that the practitioners had not been provided with full and/or accurate accounts of the insured’s activities. At MetLife’s request, the practitioners further reported that the insured’s involvement in the activities was not inconsistent with their diagnosis and that she remained unlikely to return to gainful employment.
MetLife also considered lay-witness evidence as to the activities of the insured. In her affidavit, the insured described at some length her ongoing symptoms as well as her changed and limited involvement in numerous activities. Her long-time friend gave evidence that the nature of the insured’s involvement in horse shows featuring ‘Fairymead’ was now limited, and was not a ‘business venture of any sort’. In its rejection, MetLife declined to provide ‘an exhaustive analysis of every affidavit’ but noted that the insured’s affidavit did not adequately address her involvement with horse breeding.
The primary judge found for the insured on the basis that MetLife’s consideration of the lay-witness material was not “reasonable or proper” because it involved ignoring or not engaging with “a substantial body of consistent evidence” which, taken as a whole, “provided substantial corroboration for the opinions reached by [the insured’s] treating medical professionals”. Moreover, His Honour observed that MetLife had not described in any elaborate or positive way the extent of insured’s activities, or why they were inconsistent with her diagnosed disabilities.
Grounds of Appeal
On appeal, MetLife alleged that the primary judge:
- applied the incorrect legal test by focussing on whether ‘the actual decision-making process that was adopted by the insurer was sufficiently unreasonable to vitiate the determination’
- in deciding as to the validity of MetLife’s rejection, had regard to oral testimonies and his own findings as to the credibility of certain witnesses, which were not before MetLife in its decision-making process; and
- failed to consider and apply the insured’s onus of proving her claim to MetLife; instead, his Honour required MetLife to accept the claim unless it could justify its dissatisfaction;
- failed to determine whether MetLife’s determination was unreasonable, instead testing MetLife’s conclusions against his own evaluation, preferring his own opinion where the two differed; and
- overly scrutinised the decision made by MetLife, resulting in unfairness to the insurer.
Court of Appeal decision
Meagher JA (McColl and Whit JJA agreeing): The appeal was dismissed.
MetLife did not challenge the primary judge’s finding that the insurer had proceeded without giving the lay-witness material anything more than ‘perfunctory’ consideration. It was noted that that finding was, in itself, sufficient to conclude that MetLife’s rejection was invalid. Nor did MetLife assert that it did not have sufficient time to give full and proper consideration to the affidavits and explain its treatment of them properly.
As to the specific grounds of appeal:
- The legal test applied by the primary judge was correct. The obligation to act reasonably and fairly applies to the process of consideration adopted by the insurer, as well as the insurer’s decision itself. The use of the phrase ‘sufficiently unreasonable’ in the test acknowledges that the insurer’s process or decision can only be impugned if it exceeds the ‘area of [the insurer’s] decisional freedom’ within which reasonable minds may reach different conclusions.
- The primary judge did not have regard to irrelevant evidence and considerations in his decision. In the review of the evidence in the primary decision, the summaries of affidavit evidence, testimonial evidence, and findings as to credibility were separately recorded. More importantly, the primary judge’s analysis of the validity of MetLife’s rejection did not refer to or rely upon any testimonial evidence given at trial.
- This ground of appeal as to the reversal of onus of proof on MetLife relied too heavily on the primary judge’s observation that the ‘available evidence may have been consistent with MetLife’s conclusions’. The primary judge’s meaning was that MetLife could have given bona fide consideration to the lay-witness material and, in doing so, it might have concluded that the evidence should be given little weight. This was correct.
- The primary judge did not in any way substitute his own view for one that was reasonably open to the insurer. In acknowledging that MetLife was strictly correct in its observation that the insured’s affidavit failed to address her involvement in ‘Fairymead’ events, the primary judge was merely emphasising that MetLife ignored the affidavit evidence of the insured’s long-time friend and that its doing so constituted “a serious error in MetLife’s reasoning process”;
- Speculation as to MetLife’s reasons for attaching significance to the insured’s involvement in ‘Fairymead’ events did not contribute to any material legal or factual error in the primary judge’s analysis of MetLife’s consideration of the lay-witness evidence.
Insurer’s should attach due weight to the opinions of treating medical professionals and corroboratory lay-witness evidence. Any selective isolation of evidence should be avoided; rather, individual pieces of evidence should be considered in the context of the entirety of the evidence. Ignoring or not engaging with evidence, without justification and explanation, can be fatal. Accordingly, insurers should explain their decisions with reference to available evidence in any rejections or procedural fairness letters. An insurer’s decision will not be set aside merely because a court or reasonable persons could have taken different views on the available evidence (i.e within ‘the bounds of reason’). It is an important reminder that an insurer’s decision may not be contractually binding if it is shown to be unreasonable on the material before it or if it is shown to have acted unreasonably in the process. Further, whilst a decision may objectively be one reasonably open to an insurer, if the insurer in question has not acted reasonably or fairly in its process the decision can be impeached.
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